Research On The Construction Of IPO Audit Quality Assurance Mechanisms In Our Country

The exposure of Wanfu Biotechnology fraud case shook the entire capital market,and the IPO failure of Zhonglei accounting firm who received the strictest punishmentof the China Securities Regulatory Commission (CSRC) also be revealed. Faced to thefinancial fraud of the Corporation, the certified public accountant (CPA), as “economicpolice”, failed to carry out its statutory duties. It not only damaged the interests of theminority investors, disrupting the order of the capital market, but also destroyed thetrust to the CPA. So it is necessary to analyze the deep-seated reasons for IPOaccounting audit failure and build the IPO audit quality assurance mechanism witchsuits for the national conditions of China.In this paper, it is supported by the economic man hypothesis, the principal agenttheory, and the equilibrium of supply and demand theory. Combined with the case ofWanfu Biotechnology, it analyzed the reasons for the failure of Zhonglei IPO audit fromthe accounting firm itself, industrial supervision, government supervision, and marketimperfections. At last it summarized the definition of IPO audit quality assurancemechanism, and constructed the IPO audit quality assurance mechanisms from fouraspects: firstly, to establish an effective accounting firm IPO audit quality controlsystem, including its IPO audit quality control system, IPO audit personnel quality, IPObusiness undertaking, IPO audit process quality, and IPO internal business checking;secondly, to improve the CPA profession’s self-regulatory mechanisms, including settingspecific IPO audit department and implementing the system of industry IPO auditreview; thirdly, to strengthen the supervision of a government, including eliminatingIPO audit failure from the source, by supervising the admittance of securities strictly,and increase the cost of illegal IPO audit to deter the auditors; fourthly, to play the auditmarket regulation mechanisms, proposed to rationalize the relationship betweengovernment and the market, both from the demand and supply of IPO audit, to improve the existing audit appointment system, and made a special audit of insuranceappointment system which is the insurance of financial report.The innovation points of this paper include two main points.(1) Proposed thedefinition of building IPO audit quality assurance mechanism firstly based on theanalysis of Zhonglei accounting firm IPO accounting audit failure reasons in the WanfuBiotechnology fraud case, and proposed building IPO audit quality assurancemechanism from four main points.(2) Presented the design of the financial statementsinsurance system suits for the national conditions of China, based on the research offoreign-related the financial statements of insurance and the supervision model of ourcountry. And attempt to solve the problems of high-quality supply of IPO audit from theroots, through designing the implementation of the audit regulatory in the new mode.